Jump to Any Race
National Politics|By Charlie Cook, January 3, 2017
This story was originally published on nationaljournal.com on December 30, 2016

Some things in polit­ics are hard to re­con­cile. Since Don­ald Trump’s elec­tion last month, eco­nom­ic op­tim­ism has skyrock­eted. The Con­fer­ence Board re­por­ted earli­er this week that its Decem­ber Con­sumer Con­fid­ence Sur­vey hit its highest levels since Au­gust 2001, and that while feel­ings about the cur­rent eco­nomy de­clined slightly, ex­pect­a­tions for the eco­nomy over the next six months were high­er than at any time since Decem­ber 2003. These num­bers are sim­il­ar to the Re­u­ters/Uni­versity of Michigan’s In­dex of Con­sumer Sen­ti­ment that earli­er this month reached its highest level since Janu­ary 2004. The mid-Decem­ber NBC News/Wall Street Journ­al poll showed that 42 per­cent of Amer­ic­ans be­lieve that the na­tion’s eco­nomy will get bet­ter over the next 12 months, the highest level in four years, while 19 per­cent thought it would get worse and 38 per­cent thought it would re­main about the same.

With all that in mind, con­sider that Pres­id­ent Obama’s job-ap­prov­al rat­ings are way up. In Gal­lup Or­gan­iz­a­tion track­ing polls, his ap­prov­al hit 56 per­cent last week, the highest since the earli­est months of his pres­id­ency. This was con­sist­ent with his 52 per­cent ap­prov­al in the last NBC/WSJ poll and 53 per­cent in the last Fox News poll. In fact, Obama’s job-ap­prov­al num­bers have been at or above 50 per­cent in all 12 Fox News na­tion­al polls taken since early June.

So how can voters be happy with Obama’s job in of­fice and yet al­most eu­phor­ic about the dis­tinctly an­ti­thet­ic­al Trump who is about to take of­fice? Good ques­tion.

Here’s how a Uni­versity of Michigan re­port ex­plained the ap­par­ent con­tra­dic­tion: “An all-time re­cord num­ber of con­sumers (18%) spon­tan­eously men­tioned the ex­pec­ted fa­vor­able im­pact of Trump’s policies on the eco­nomy. This was twice as high as the pri­or peak (9%) re­cor­ded in 1981 when Re­agan took of­fice. To be sure, nearly as many con­sumers re­ferred un­fa­vor­ably to an­ti­cip­ated changes in eco­nom­ic policies, but those ref­er­ences were less than half as fre­quent as the peak level re­cor­ded just three years ago (16% vs. 37%). Con­sumers an­ti­cip­ated that a stronger eco­nomy would cre­ate more jobs, al­though ex­pec­ted wage gains were quite mea­ger. Smal­ler in­come gains were off­set by re­cord low in­fla­tion ex­pect­a­tions. Need­less to say, the over­all gain in con­fid­ence was based on an­ti­cip­ated policy changes, with spe­cif­ic de­tails as yet un­known. Such fa­vor­able ex­pect­a­tions could help jump-start growth be­fore the ac­tu­al en­act­ment of policy changes, and form high­er per­form­ance stand­ards that will be used to judge the Trump pres­id­ency.”

This Michigan ana­lys­is echoes the Con­fer­ence Board re­port find­ing that views of the cur­rent eco­nomy di­min­ished slightly. As Dir­ect­or of Eco­nom­ic In­dic­at­ors Lynn Franco put it, “Con­sumer Con­fid­ence im­proved fur­ther in Decem­ber, due solely to in­creas­ing ex­pect­a­tions which hit a 13-year high.” Franco went on to re­port that “the post-elec­tion surge in op­tim­ism for the eco­nomy, jobs, and in­come pro­spects, as well as for stock prices which reached a 13-year high, was most pro­nounced among older con­sumers. Con­sumers’ as­sess­ment of cur­rent con­di­tions, which de­clined, still sug­gests that eco­nom­ic growth con­tin­ued through the fi­nal months of 2016. Look­ing ahead to 2017, con­sumers’ con­tin­ued op­tim­ism will de­pend on wheth­er or not their ex­pect­a­tions are real­ized.”

In short, at least a size­able num­ber of Amer­ic­ans are quite hope­ful that things will get bet­ter over the next year, at least in part be­cause of Trump’s elec­tion. It also might be worth not­ing that the sur­veys showed that much of the op­tim­ism was among older Amer­ic­ans. With the stock mar­ket run­ning pretty much at re­cord highs since Novem­ber, and older Amer­ic­ans gen­er­ally more in­ves­ted in the stock mar­ket than young­er people, this op­tim­ism may be re­lated to or caused by the mar­ket’s per­form­ance. But it’s not quite clear which is the cart and which is the horse. Are people feel­ing bet­ter be­cause the stock mar­ket is do­ing well, or is the stock mar­ket do­ing well be­cause people are feel­ing bet­ter, or maybe both?

Ob­vi­ously how the eco­nomy per­forms over the next year is key. Just be­fore Christ­mas, the Com­merce De­part­ment’s Bur­eau of Eco­nom­ic Ana­lys­is re­leased its “third” es­tim­ate of real change in the gross do­mest­ic product (the first es­tim­ate is pre­lim­in­ary, the second based on more data, the third vir­tu­ally com­plete, with fi­nal num­bers out in Ju­ly). The third quarter showed an up­wardly re­vised rate of 3.5 per­cent, and pre­lim­in­ary num­bers for the fourth quarter will be out on Jan. 27. The Blue Chip Eco­nom­ic In­dic­at­ors sur­vey of 53 top eco­nom­ists sug­ges­ted that the eco­nomy was likely to slow to 2.2 per­cent real GDP growth rate; the 10 most op­tim­ist­ic es­tim­ates av­er­aged 2.9 per­cent, while the 10 most pess­im­ist­ic av­er­aged 1.5 per­cent. For each quarter of 2017, the av­er­ages were in the 2.2-to-2.4 per­cent range, with the op­tim­ists av­er­aging 2.7 to 3 per­cent and the pess­im­ists av­er­aging around 1.7 and 1.8 per­cent.

For the Trump team, the les­son in all of this is that things bet­ter im­prove a lot or they bet­ter have someone or something else to blame. Re­pub­lic­ans will now hold the pres­id­ency and ma­jor­it­ies in the House and Sen­ate. They will con­trol the pres­id­ency and the House, but con­trol of the Sen­ate de­pends on at least 60 votes to de­feat a fili­buster. With just 52 seats in the Sen­ate, Re­pub­lic­ans will only be able to con­trol meas­ures that go through the budget-re­con­cili­ation pro­cess, which is not sub­ject to fili­busters.

While this puts a lot of pres­sure on Re­pub­lic­ans, it also puts some on Sen­ate Demo­crats. To the ex­tent that they are seen as ob­struc­tion­ists, they take on culp­ab­il­ity for any­thing that goes wrong. Trump and Re­pub­lic­ans can use them as a foil, blam­ing them for get­ting in the way of gov­ern­ing. That’s why Sen­ate Demo­crats need to pick their fights wisely. A strategy of giv­ing their op­pon­ents enough rope to hang them­selves is something they ought to ser­i­ously con­sider.

It’s go­ing to be very hard for Pres­id­ent Trump to make good on the high ex­pect­a­tions of his sup­port­ers. If he dis­ap­points them, who will they blame? But if Trump does de­liv­er, Demo­crats won’t be rel­ev­ant any­way. Happy New Year.